New to the board - Have question about paying debt

**disneysteve** · 07-18-2009, 05:46 AM

Welcome to the site.

Give us a bit more info. What is the balance and interest rate on the loan? How large of a savings cushion do you have currently? Any other debts (credit cards, car loans, etc.)?

Generally, folks do consider borrowing to further your education a good thing, but only if it gets you into a better job that justifies the money spent. Borrowing 100K to enter a very low-paying field, for example, would be "bad" debt.

Give us the details about your situation and we can give a better answer to your question.

**piratepride** · 07-18-2009, 05:58 AM

Lets see-
My loan is for 24,000 with a 6.5 interest rate. I took it out for my master of social work. Which I hope would be considered an investment!! Though I'm not sure at times.
My savings is awful at 1,500 because of my part time status. I recently became licensed in my field which gave me a nice pay increase. That pay increase is what I can't figure where to allocate it.
I have a credit card but its completely paid off. Its only for emergencies and even then I always pay it off. My husband has his student loans and hospital bills but he pays for all those. Both of our cars are paid off. So the only debt that I am paying off it the 24,000.

Thanks!!!

**disneysteve** · 07-18-2009, 06:32 AM

That helps. There is no place safe to put your savings that will outperform the 6.5% your loan is costing you. It doesn't make sense to put money in a money market earning 2% while paying 6.5% on debt.

Other than that, I wouldn't have any advice without seeing the big picture - total household income, total household debt, total household savings, etc. Just looking at your half of the situation isn't adequate to decide how best to allocate the money. For example, your loan is at 6.5% but if your husband's loan is at 8%, then any extra payment should be going to that first, not to your loan first. You guys should be working together to get debt-free and build your savings going forward.

**maat55** · 07-18-2009, 01:15 PM

Whatever plan of action you choose, you need to be very persistant about eliminating leaks(occational spending) in your plan.

You mentioned that you are able to save 800 per month, but only have 1500 in savings. This says that you are either just starting or have massive leaks.

To see real progress, you will have to establish the plan and stick to it. It will mean saying no to alot of distractions. But doing so will feed optimism and results. Good luck.

**disneysteve** · 07-18-2009, 02:14 PM

Originally posted by maat55 View Post

You mentioned that you are able to save 800 per month, but only have 1500 in savings. This says that you are either just starting or have massive leaks.

It sounded to me like OP was recently employed again after not being employed for some period.

I'm just concerned that you aren't looking at the big picture. If you are "saving" $800/month but you both have student loans and there are outstanding medical bills, are you actually saving anything or just delaying repayment of your debts?

**piratepride** · 07-18-2009, 02:36 PM

I just started working this February so I haven't been able to build savings like I would of. This is my first job since graduating from grad school so I am just starting out fresh.

I guess why I am putting so much into my savings at this is time is that I am trying avoid defaulting or missing payments when I am jobless again. My reasoning was that I could dip into my savings to keep paying my loan until I can find another job. My husband and I move again this October to a new base after being at our current one only a year.

I checked with my husband and between us two we have around 70,000 worth of debt. With a cadet loan of 18,000 that is automatically taken out of my husband's paycheck with a 2% interest rate that doesn't "factor" in the monthly budget as we never see it. His hospital bills are interest free and his student loans are around 5 % interest. My loan of 24,00 is the highest with 6.5 interest rate. Is this what you would call "good" debt as we don't have any credit card debt?

So we do have to really refocus from saving and investing to paying off our debt.
Thanks again for the insight and info. It helps to have an outside perspective.

**disneysteve** · 07-18-2009, 03:03 PM

You need to sit down and list everything: total income, total debt, total savings and total monthly expenses. If losing your job would leave you unable to make your student loan payments, that's a serious problem. My advice would be to post your full budget here and let us pick it apart and help point out places you could trim spending so you could direct more toward debt reduction and building your EF.

By the way, forget about this good debt-bad debt concept. That only refers to when you borrow the money, not when you are in repayment. At that point, all debt is the same, a drain on your financial growth.

**creditcardfree** · 07-18-2009, 03:37 PM

Originally posted by disneysteve View Post

By the way, forget about this good debt-bad debt concept. That only refers to when you borrow the money, not when you are in repayment. At that point, all debt is the same, a drain on your financial growth.

I agree. The student loan interest will reduce your taxable income, but it isn't a good reason to keep the debt.

Please give us more details on your total household income, debts, savings and monthly expenditures. The more details the better the advice!

**swanson719** · 07-18-2009, 05:23 PM

Piratepride,

Im a bit partial to Dave Ramsey's Total Money Makeover, it being what we used to get out of debt. It's a short read, and about $20 at your local bookstore. He also has a military program available on many posts. $70,000 isn't a lot of debt based on officer pay, so if you get on a good, tight budget, you should be able to knock it out in a couple years. It always makes more sense to pay off debt than put money in savings if the debts interest rate is more than the savings rate. His student loan would be a wash, but usually worth the peace of mind to know your debt free.

**piratepride** · 07-19-2009, 09:52 AM

Thank you! I will look into reading the book

**terces** · 07-20-2009, 12:21 PM

Remember as a military spouse that many states allow you to collect unemployment when forced to move due to government orders. Will help in the interim while you look for the next job.

"According to the Defense Department, 21 states now allow trailing military spouses to receive unemployment benefits. Eight states deny such benefits outright; the rest consider such requests on a case-by-case basis."

**Tree0164** · 07-21-2009, 02:28 AM

If you have 800 a month do 50/50 split on that 400 to savings and 400 extra towards your student loans. Once you get your Efund up to a comfortable level for you then put all 800 a month towards that.

Writing down the budget here we can check everything out for you

New to the board - Have question about paying debt